Galilee Energy : Half Year Financial Statements – 31 December 2021 11 March 2021

CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2020

Galilee Energy Limited

ABN 11 064 957 419 and controlled entities

Galilee Energy Limited
Contents
Page
number
Directors' report	1
Auditor's independence declaration	4
Consolidated statement of profit or loss and other comprehensive income	5
Consolidated statement of financial position	6
Consolidated statement of changes in equity	7
Consolidated statement of cash flows	8
Notes to the half-year financial statements	9
Directors' declaration	15
Independent auditor's review report	16

Directors' report

In accordance with a resolution of the Board, the directors present their report on the consolidated entity ("Galilee" or "Company") consisting of Galilee Energy Limited and the entities it controlled at the end of or during the half-year ended 31 December 2020.

Directors

The directors of Galilee in office during the half-year and up to the date of this report were:

Ray Shorrocks - Appointed 02/12/2013, Non-executive Chairman since 31/03/2018

Dr David King - Appointed 24/09/2013, Non-executive Director since 24/09/2013

Peter Lansom - Appointed 24/09/2013, Managing Director since 31/10/2013

Stephen Kelemen - Appointed 31/03/2018, Non-executive Director since 31/03/2018

Gordon Grieve - Appointed 06/09/2019, Non-executive Director since 06/09/2019

Greg Columbus - Appointed 17/09/2020, Non-executive Director since 17/09/2020

Principal activities

Galilee Energy is a Brisbane based energy company with a high quality portfolio of assets focussed onshore Australia.

The principal activity of the consolidated entity is oil and gas exploration and production. The foundation asset of the Company is the Glenaras Gas Project located in the Galilee Basin near Longreach in Queensland.

Results from operations

The loss before income tax for the half-year ended 31 December 2020 was $11.5 million (31 December 2019: $5.8 million). The loss for the half-year primarily reflects the expenditure on exploration and evaluation of $11.6 million, which was comprised of the Glenaras vertical drilling programme, Glenaras water management projects and the Glenaras pilot operating activities, in addition to staff costs and overheads. The sum of $3.8 million was received during the half-year period relating to an R&D tax offset claim, this has been classified as other income.

Review of operations

Glenaras Gas Project (ATP2019)

The Company's flagship Glenaras Gas Project lies within the highly prospective ATP 2019 permit in Queensland's Galilee Basin. The permit covers an area of approximately 3,200 km2 and is 100% owned and operated by Galilee Energy (Figure 1).

The project contains a significant coal seam gas Contingent Resource position in the Betts Creek and Aramac coals with a 1C of 308 PJ, a 2C of 2,508 PJ and a 3C of 5,314 PJ, as a result of the extensive historical exploration activity within the permit.

Significant activity was undertaken on the ATP 2019 permit during the half year. Following on from the results of the Glenaras 17A observation well and the Schlumberger reservoir simulation study, an additional five new vertical wells were drilled safely, on time and within budget. The objective of these additional wells was to enhance the reservoir pressure drawdown to accelerate the onset of gas production. At the time of writing, all eleven wells (Figure 2) at the pilot are now on continuous production. The pilot will be on production for an extended period to de-water and lower the pressure in the surrounding coal with the aim of achieving a commercial gas flow.

Significant progress has been made with the Glenaras irrigation trial, with the centre pivot irrigation system (Figures 3, 4) now fully operational and utilizing produced water, with no treatment required due to the high quality of the water.

Site construction of the 2 ML/d reverse osmosis water treatment plant is complete and commissioning of the plant has commenced. This treated water will be available for utilisation in the managed aquifer recharge project which was recently approved by Queensland Department of Environment and Science.

Galilee has further secured the entirety of the company's extensive Contingent Resource in ATP 2019 with the concurrent award of two new Potential Commercial Areas (PCAs). PCAs 314 and 315 have been awarded for 15 years and 10 years respectively. The award of these two PCAs is a key step towards commercialisation of the Glenaras Gas Project as it is a clear acknowledgement by the Queensland Government of the considerable certified Contingent Resource and provides Galilee the required time to mature the Resources to Reserves and produce gas to market.

Figure 1.

Directors' Report (continued)

Review of operations (continued)

Springsure (ATP2050)

Over 696km of 2D seismic data has been reprocessed in and around ATP 2050 and integrated with an additional 900km of 2D data to produce contemporary time and depth maps of the key Permian geological horizons in the permit. Exploration focus is being placed on the multiple conventional gas prospects and leads that have been identified through the reprocessing and remapping. The improved visualisation of the subsurface structure and stratigraphy has confirmed several potential gas-bearing structures which are highly prospective and analogous to the adjacent Northern Denison gas fields of Springton-Arcturus, Yandina and Turkey Creek.

Kumbarilla (ATP2043)

QGC and Galilee have now jointly executed the data swap agreement for exchange of the data acquired in the Kumbarilla drilling campaign for the pilot production data in the adjacent PL 1009 held by QGC.

Despite the considerable disruption on global markets due to the uncertainty surrounding the COVID-19 pandemic, the Galilee board and management teams have successfully worked through the volatility and uncertainty and positioned Galilee to deliver on its growth plans and have maintained a strong financial position. The Company pro-actively adapted its operating procedures both in head office and field operations in accordance with the Federal and State requirements associated with the COVID-19 pandemic. The safety of our staff and all contractors is paramount and with the revised operating procedures there has been no disruption to the drilling programmes or field operations.

Galilee's diversified gas acreage in Queensland provides opportunities to meet the forecast supply-demand gap that exists on the east coast of Australia from around 2022 due to the continuing uncertainty regarding indigenous gas supply. The infrastructure partnership Galilee has with Jemena underpins our Glenaras Gas Project development plans.

Galilee has a deep commitment to working with community stakeholders in the areas within which we operate. Galilee operates on the basis of mutual respect and co-existence with all of its stakeholders as the key pillar of its community relations with government, landowners and the broader community.

Figure 2.

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